Homeowners experience significant yearly savings of thousands due to interest rate reductions, coinciding with a housing market rebound in the year 2025.
Lower Interest Rates Boost Homebuying in South Africa
In the midst of a subdued economic outlook for 2025, the South African Reserve Bank (SARB) has been pursuing monetary easing, aiming to support homebuyers with anticipated interest rate cuts. This move is expected to benefit homebuyers in the second half of 2025 and into 2026.
The SARB has already reduced the repo and prime lending rates by 25-basis points for a second consecutive time. As a result, the new prime lending rate stands at 10.50%, and the repo rate is at 7%. This decrease in borrowing costs has made home loans more affordable, as evidenced by the current monthly repayment on a home priced at R1,455,712 over 20 years, which is R14,534, down from R15,776 a year ago.
Rhys Dyer, CEO of the ooba Group, believes that these rate cuts will support homebuyers and homebuying activity. In Q2 '25, ooba Home Loans saw an 11% year-on-year increase in home loan applications and a 18.5% increase in the total value of these applications. This growth is reflected in the higher value of home loan applications in Q2 '25.
First-time homebuyers are making a cautious return to the market, up 1% to 46%. In Q2 '25, first-time homebuyers are prioritizing savings and actively taking steps to pay down their home loans. Despite spending 3.5% more on homes year-on-year, the average deposit for first-time homebuyers increased significantly, to 10.4%. However, 59% of first-time homebuyers secured a home without a deposit in Q2 '25, and 10.5% of first-time homebuyers purchased a home without a deposit or access to funds for transfer and bond costs.
The banks are stepping in to help those struggling to save. Banks are offering attractive incentives like zero-deposit loans and high discounts to the prime lending rate. In Q2 '25, the average interest rate for ooba's customers was prime less 0.67%.
The growth in first-time homebuyers is a positive sign for the housing market. Deposits for the average homebuyer have decreased by 13.5% year-on-year, and 1.9% for first-time homebuyers (as at Q2 '25). This trend indicates that more people are able to enter the property market, contributing to a healthier housing sector.
However, downside risks remain, including ongoing US-South Africa trade tensions, elevated tariffs on key exports, and global geopolitical conflicts impacting investor sentiment. Despite these challenges, the SARB's monetary policy stance is expected to continue supporting homebuyers and the housing market in the coming months.
In conclusion, the SARB's monetary policy decisions are providing a boost to the housing market in 2025, with lower interest rates making home loans more affordable for many South Africans. This trend is expected to continue, offering a positive outlook for homebuyers in the second half of 2025 and into 2026.
References: 1. Fin24 2. IMF 3. BusinessTech 4. CNBC Africa 5. Fin24
- The interest rate cuts by the South African Reserve Bank (SARB) aim to support not only homebuyers but also the overall housing market, which could spur increased investing opportunities in real-estate.
- The decrease in borrowing costs has made property more accessible for first-time homebuyers, as shown by the 1% increase in first-time buyers and the significant rise in the average deposit for these buyers.
- Banks are offering attractive financing options like zero-deposit loans and discounted interest rates for homebuyers, which could influence finance-related decisions when considering property investments in South Africa.
